Linamar Corporation · TSX:LNR

Linamar — Q2 2019 Earnings Presentation

51 slides from Linamar's earnings presentation, Aug 8, 2019

  1. Slide 1: Conference Call Presentation

    Q2 2019 Conference Call Information Local: (647) 427-3383 Toll Free: (888) 424-9894 (North America) Conference ID 9388922 Linda Hasenfratz Conference Call Presentation August 8, 2019

  2. Slide 2: Forward Looking Information, Risk and Uncertainties

    Forward Looking Information, Risk and Uncertainties Certain information regarding Linamar set forth in this presentation and oral summary, including managements assessment of the Company’s future plans and operations may constitute forward-looking statements. This information is based on current exp

  3. Slide 3: Sales, Normalized Earnings and CPV

    Sales, Normalized¹ Earnings and CPV 1 –Management uses certain non-GAAP financial measures including normalized earnings which exclude foreign exchange impacts and the impact of unusual items when analyzing consolidated and segment underlying operational performance. For more information refer to th

  4. Slide 4: Sales, Normalized Earnings, and Margins (in millions CAD)

    Sales, Normalized Earnings, and Margins (in millions CAD) Q2 2019 Q2 2018 %Δ Q2 2019 Helped By:  Sales meaningfully outperforms soft  Strong launches in Transportation Sales 2,086.1 2,157.4 (3.3%) global markets with only 3.3% decline  Higher TH and Boom sales  Global Vehicle markets down 5.6% H

  5. Slide 5: Automotive Sales & Content Per Vehicle (CPV)

    Automotive Sales & Content Per Vehicle (CPV) CPV Q2 2019 CPV Q2 2018 CPV % Change Vehicle Production Automotive Automotive Automotive Units % Change Sales Q2 2019 Sales Q2 2018 Sales % Change (CAD Millions) (CAD Millions) North America 165.82 161.61 2.6% (2.4%) 727.1 726.1 0.1% Europe 81.56 80.78 1.

  6. Slide 6: Commercial & Industrial Sales (in millions CAD)

    Commercial & Industrial Sales (in millions CAD) Q2 2019 Q2 2018 % Change  Skyjack  boom and telehandler sales up on market Sales 689.2 745.7 (7.6%) share gains  scissor sales down on weak markets in EU, NA  MacDon sales down on tariff and trade issues QvQ¹ Change in Commerical & Industrial Sales

  7. Slide 7: Capital Expenditures (in millions CAD)

    Capital Expenditures (in millions CAD) Q2 2019 Q2 2018  Normal range (annually) 6-8%  2019 expect low end of range, down from 2018 Capital Expenditures (Capex) 126.4 119.7  2020 expect low end of range  Using disciplined approach to spending given economic Capex as a % of Sales 6.1% 5.5% uncerta

  8. Slide 8: Leverage (in millions CAD)

    Leverage (in millions CAD) Q2 2019 Q1 2019 Q2 2018 Excellent FCF of $179 mill in Q2 Net Debt 1,931.7 2,084.8 2,156.5 $229 mill of debt repaid since peak in Q1 last year Net Debt to EBITDA 1.73x 1.78x 1.75x Net Debt to EBITDA 0.92x 0.83x 1.79x 1.75x 1.69x 1.68x 1.78x 1.73x 1 1 1 1 Q3 2017 Q4 2017 Q

  9. Slide 9: 2019 Expected to Drive Solid Free Cash Flow

    2019 Expected to Drive Solid Free Cash Flow 500 Min Target 2019 expected to generate between 450 $500 and $700 million through  Strong earnings;  Lower Capex than 2018; 400 350  Focused NCWC Improvements; and 300  Long Term AR (“LTAR”) Improvements 250 NCWC Improvements focused on Millions 200

  10. Slide 10: Market Outlook

    Market Outlook 10

  11. Slide 11: Market Snapshot 2019, 2020

    Market Snapshot 2019, 2020 Transportation Industrial Transportation Industrial 2019 Agriculture 2020 Automotive (LV) Commercial Truck Skyjack Automotive (LV) Commercial Truck Skyjack North America Decline Flat Moderate Growth Decline North America Flat Decline Decline Europe Decline Flat Flat Modera

  12. Slide 12: Auto Volumes Potentially Recovering Back Half of 2019

    Auto Volumes Potentially Recovering Back Half of 2019 North America Light Vehicle Asia-Pacific Light Vehicle Europe Light Vehicle Production by Quarter Production by Quarter Production by Quarter 4.5 13.5 7.0 4.4 4.4 5.9 6.0 4.4 13.0 5.6 13.0 12.9 6.0 5.6 5.4 5.5 4.3 4.3 4.2 4.8 4.2 12.5 5.0 4.6 4.2

  13. Slide 13: IHS Light Vehicle Production Forecast

    IHS Light Vehicle Production Forecast Global light vehicle production trough in 2019. Lowest production will occur in Q3-2019. Global Light Vehicle Production Forecast by Year Global Light Vehicle Production Forecast by Quarter 120 30 103.2 104.9 96.4 99.3 101.5 100 95.1 94.2 93.5 23.6 23.9 90.8 90.

  14. Slide 14: Historical NA Auto Cycles

    Historical NA Auto Cycles NA Historical Auto Production Cycle 120% 10 9 100% 8 7 80% 6 Years % Change 60% 5 4 40% 3 2 20% 1 0% - Growth Decline Growth Decline Growth Decline Growth Decline Growth Decline Growth Decline '17-'20 '61-'65 '66-'70 '71-'73 '74-'75 '76-'78 '79-'82 '83-'85 '86-'91 '92-'00 '

  15. Slide 15: Track Record of Growth Regardless of Auto Cycle

    Track Record of Growth Regardless of Auto Cycle 20 20.00 CAGR (3.3%) CAGR 5.7% 15 15.00 US Vehicle Units (Millions) 10 2000-2018 10.00 EPS Normalized CAGR -- 16.1% US Vehicle Sales CAGR -- 0% CAGR 97.0% 5 5.00 CAGR 10.9% 0 - 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

  16. Slide 16: Growth Update and Outlook

    Growth Update and Outlook 16

  17. Slide 17: Electrified Vehicles Key Growth Opportunity for Linamar

    Electrified Vehicles Key Growth Opportunity for Linamar $80 $70 $60 Expected BEV Global CPV in 2023 same as ICE Global CPV only 2 years ago $50 $40 $30 $20 $10 $0 2015 2016 2017 2018 2019 2020 2021 2022 2023 -$10 Electric Hybrid ICE Updated: Q2 2019, estimates based on current projections and EV app

  18. Slide 18: Global Total Addressable Market Grows 2.5x in Years

    Global Total Addressable Market Grows 2.5x in 10 Years $400 $350 $300 Addressable Market (Billions $CAN) $250 Addressable market more than doubles between 2019 and 2031 $200 $150 $100 $50 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

  19. Slide 19: Launches

    Launches 4,500.00 Launching nearly $4.4 billion of new work today 4,000.00 3,500.00 3,000.00 2,500.00 2,000.00 1,500.00 1,000.00 500.00 - 2018 2019 2020 2021 2022 2023 Other Driveline Engine Transmission Sales from Launch add: $700 to $800 Million in 2019 , >$1 Billion in 2020 19

  20. Slide 20: Outlook

    Outlook Consolidated 2018 Expectations Expectations Q3 Expectations Normal Ranges Actuals 2019 2020 Sales Growth Flat Single Digit  Auto Normalized EBIT Growth Single Digit Declines Double Digit  Normal seasonal slowdown vs Q2 Normalized EBITDA Growth Flat to Modest Decline Double Digit  Ag Norma

  21. Slide 21: New Business

    New Business "eee? Fes <a” ea pee

  22. Slide 22: New Business Wins: Battery Electric Vehicle Driveline Components

    New Business Wins: Battery Electric Vehicle Driveline Components Package Revenue $22 million / year Several driveline components for BEVs SOP Year in China 2022 Peak Volume Year 2026 Production Location 22

  23. Slide 23: New Business Wins: Battery Electric Vehicle Driveline Components

    New Business Wins: Battery Electric Vehicle Driveline Components Package Revenue > $13 million / year Several components for BEV trucks in SOP Year NA 2021 Peak Volume Year 2024 Production Location 23

  24. Slide 24: New Business Wins: Driveline Components

    New Business Wins: Driveline Components Package Volume 200,000 / year Driveline components for major Japanese OEM SOP Year 2020 Peak Volume Year 2022 Production Location 24

  25. Slide 25: New Business Wins: Cylinder Head Casting

    New Business Wins: Cylinder Head Casting Package Revenue $52 million / year More than $50 million in cylinder head SOP Year casting wins for NA and EU 2022 Peak Volume Year 2024 Production Location 25

  26. Slide 26: New Business Wins: Transmission Components

    New Business Wins: Transmission Components Package Volume 300,000 / year Ring gears for major French OEM SOP Year 2021 Peak Volume Year 2022 Production Location 26

  27. Slide 27: New Business Wins: Engine Components

    New Business Wins: Engine Components Package Revenue >$70 million / year >$70mill in key engine components for SOP Year NA 2020 Peak Volume Year 2023 Production Location 27

  28. Slide 28: New Business Wins: Engine Components

    New Business Wins: Engine Components Package Volume 140,000 / year SOP Year Balance shaft assembly for China 2020 Peak Volume Year 2023 Production Location 28

  29. Slide 29: Innovation

    Innovation 29

  30. Slide 30: Skyjack - Self Check

    - Self Check “Skyjack om Oi oe i Oe Ok

  31. Slide 31: Linamar Partnering on Innovation

    Linamar Partnering on Innovation What if you could replace your furnace, air conditioner, and your hot water heater with 1 appliance? …And a claimed 40% to 50% reduction in utility costs 31

  32. Slide 32: MacDon: New R & D Centre (MDW)

    MacDon: New R & D Centre (MDW) Background  Since inception in 2015, MDW have grown to 10 designers supporting legacy product development and R&D in Madison, WI.  Growth plan is to double engineering resources by 2023 Facility Project  5.7 acres bought in December 2018 in Sun Prairie, WI  Groundb

  33. Slide 33: iHub

    iHub 33

  34. Slide 34: Digitization with AI/ML

    Digitization with AI/ML 61 Plants 2,912 LMMS Data 3,085 846 Traceability Collection Connections Robots Marking Stations 1,939 2,222 RFID Stations 1080 Connected Machines Vision Systems 1,937 9 Traceability Read Stations AGVs July 2019 34

  35. Slide 35: Operations

    Operations 35

  36. Slide 36: LTH

    “Nites Tm ee

  37. Slide 37: OROS Expansion

    OROS Expansion 37

  38. Slide 38: Linamar Powertrain Wuxi (LPW)

    Linamar Powertrain Wuxi (LPW) 38

  39. Slide 39: Financial Review

    Financial Review Dale Schneider 39

  40. Slide 40: Sales, Normalized Earnings, and Margins (in millions CAD)

    Sales, Normalized Earnings, and Margins (in millions CAD) Q2 2019 Q2 2018 %Δ Q2 2019 Normalized Results Helped By:  Global light vehicle market down Sales 2,086.1 2,157.4 (3.3%)  Strong launches in Transportation 5.6%  Higher volumes on Boom and EBITDA – Normalized² 326.2 363.7 (10.3%)  North Am

  41. Slide 41: Foreign Exchange Gain/Loss (in millions CAD)

    Foreign Exchange Gain/Loss (in millions CAD) Q2 2019 Q2 2018 +/-  Net FX Loss of $8.8 FX Gain/(Loss) – Operating1 (8.3) 9.1 (17.4)  FX Loss – Operating was $8.3 FX Gain/(Loss) – Financing (0.5) (0.3) (0.2)  Industrial FX Loss was $7.9  Transportation FX Loss was $0.4 Total FX Gain/(Loss) (8.8) 8

  42. Slide 42: Industrial Sales, Earnings, and Margins (in millions CAD)

    Industrial Sales, Earnings, and Margins (in millions CAD) Q2 2019 Q2 2018  Industrial sales decreased by 7.9% or $51.5 to reach $599.1  The sales decrease for the quarter was due to:  lower scissor volumes in Europe and North America as a result of the Sales 599.1 650.6 8.5% decline in the market

  43. Slide 43: Transportation Sales, Earnings, and Margins (in millions CAD)

    Transportation Sales, Earnings, and Margins (in millions CAD) Q2 2019 Q2 2018  Transportation sales decreased by $19.8 to reach $1.49 billion.  The sales was mainly driven by:  lower volumes as a result of the global light vehicle market being down Sales 1,487.0 1,506.8 5.6% and certain programs

  44. Slide 44: Operating Expenses (in millions CAD)

    Operating Expenses (in millions CAD) Q2 2019 Q2 2018 +/- %  Gross Margin decreased 13.3% mainly due to:  a reduction of earnings related to the volume and market declines; Sales 2,086.1 2,157.4 (71.3) (3.3%)  additional costs related to heavy launch activity globally; Cost of Goods Sold 1,751.7 1

  45. Slide 45: Finance Expenses & Income Tax (in millions CAD)

    Finance Expenses & Income Tax (in millions CAD) Q2 2019 Q2 2018 +/-  Finance expenses increased $1.1  Finance expenses where hurt by:  the Bank of Canada rate hikes following Q2 2018; and  lower interest earned from lower cash and long-term AR levels. Finance Expense 13.7 12.6 1.1  Finance expe

  46. Slide 46: Leverage (in millions CAD)

    Leverage (in millions CAD) Q2 2019 Q2 2018  Cash position at the end of the quarter was $437.6  Generated $319.8 in Cash from Operating Activities Cash Position 437.6 417.1  Generated $179.0 in Free Cash Flow Available Cash on Credit Facilities 774.4 595.3  Net Debt to EBITDA decreased to 1.73x

  47. Slide 47: Conclusion

    Conclusion  Global light vehicle market down 5.6%  North American and European scissor markets down 8.5%  North American combine market down 19% due to on-going trade pressure  Sales outperforms our markets  Great Free Cashflow generation  Strong Normalized EBITDA margins at 15.6% 47

  48. Slide 48: Question and Answer

    Question and Answer 48

  49. Slide 49: Outlook

    Outlook Consolidated 2018 Expectations Expectations Q3 Expectations Normal Ranges Actuals 2019 2020 Sales Growth Flat Single Digit  Auto Normalized EBIT Growth Single Digit Declines Double Digit  Normal seasonal slowdown vs Q2 Normalized EBITDA Growth Flat to Modest Decline Double Digit  Ag Norma

  50. Slide 50: Key Messages

    Key Messages 1. Strong performance in the quarter on free cash flow of nearly $180 million and expectation for year of $500 to $700 mill 2. Market share growth largely offsetting market softness, cost control and improving launch costs driving strong EBITDA margins of 15.6%, EBITDA growth in the bac

  51. Slide 51: Thank You

    Thank You www.linamar.com @linamarcorp Linamar Corporation

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